Workday lately announced outcomes for the second-quarter of fiscal 2027, beating estimates and pulling in numbers that would usually warrant an improve from analysts. Despite the beat, one Wall Street firm selected to step apart.
On August 28, Freedom Broker analyst Almas Almaganbetov downgraded Workday, Inc. (NASDAQ:WDAY) from Buy to Hold with a price goal of $200.00, up from $180. While the firm did not deny the flawless quarter, it does believe that the flawless execution may already be mirrored in its valuation.
The Impeccable Quarter
The company reported complete revenues of $2.649 billion, an increase of 12.8% from the second quarter of fiscal 2026. Subscription revenues jumped nearly 14% to $2.471 billion from the same period last 12 months. Operating income was $313 million in contrast to $248 million in the same period last 12 months.
Adjusted working income and EPS beat forecasts considerably on the back of strict price self-discipline and inner AI-driven automation.
Management also eased investor fears regarding AI disruption, noting how its AI options were seeing sturdy adoption and also driving buyer wins. AI annual recurring income approached $600 million. This was, in majority, due to the surging curiosity in agentic options. The company now expects fiscal 2028 subscription income to grow by practically 11%. This is in line with its projected growth charge for the second half of fiscal 2027.
The company has also announced a new $4.0 billion share repurchase authorization.
Why Freedom Brokers Downgraded Anyway
Despite the shining execution demonstrated by the quarter, Freedom Brokers stays on the sidelines due to a few elements. For starters, the company’s promotional Flex credit has been encouraging clients to strive out its new AI instruments, but only over 200 clients had signed up for Flex Credits as reported for the quarter.
While AI adoption is a key focus for the company, management has famous that income from usage-based fashions may take some time to materialize. The firm famous how management’s focus has weighed on complete subscription backlog growth of 8% year-over-year.
The firm also asserted that it anticipates subscription income deceleration to an estimated 11% year-over-year in the second half of fiscal 2027 and fiscal 2028. Part of this deceleration is possible due to a combine shift in bookings toward the put in base.
Valuation also stays a concern, which presently displays margin optimization beneficial properties against restricted near-term income acceleration catalysts.